Digital Settlement Asset

Definition ∞ A Digital Settlement Asset is a digital representation of value used to discharge financial obligations or finalize transactions within a digital payment system. This asset facilitates the transfer of value between parties, enabling the completion of financial exchanges on a distributed ledger or similar digital infrastructure. It serves as the final instrument for payment, removing counterparty risk upon transfer. Such assets are fundamental to the operation of modern digital financial markets.
Context ∞ The discussion surrounding digital settlement assets centers on their role in enhancing payment efficiency, reducing settlement times, and mitigating systemic risk across various financial sectors. Central banks are actively exploring central bank digital currencies as potential digital settlement assets. A key debate involves the regulatory classification and interoperability of different digital settlement assets across jurisdictions.